According to the Mesh, the future of business is sharing - but do we have the goods?

Gansky has made a career of spotting potential trends, then molding those ideas into wildly successful business enterprises. And while Gansky herself has thrived in the current economic system—Ofoto, a mobile photo-sharing company she cofounded in 1999 and then sold to Kodak two years later for somwhere under $100 million, according to the Wall Street Journal, is just one example—her latest venture involves upending that system. In Gansky’s view, a new economic paradigm is emerging with the potential to recast the way we think of buying, selling and creating wealth. She calls it the Mesh, and its premise is as simple as a kindergarten aphorism: We all need to learn to share.

Gansky didn’t start out with the intention of creating a “big idea.” Instead, she says, the Mesh grew naturally out of a series of thoughts and observations she had about entrepreneurship.

“I’d been seeing a shift in the way that my colleagues and I think about building an early-stage company,” Gansky says. “Over the past 10 years, it’s become far faster and less costly to go from an early idea to a working prototype for a web-based business.”

Starting Ofoto, in other words, would no longer take the $60 million in venture capital Gansky and her colleagues raised—today, she estimates it would cost just 5 percent of that, or less. This difference, she says, alerted her to the “fundamental change that’s happening in my own industry.”

(In a March 2011 lecture at Stanford Business School, author Steve Blank described this “democratization of entrepreneurship” as the natural result of lower technology costs, faster product-to-market rates and consumers’ earlier adoption of new products, among other factors.)

But Gansky’s theory is also cultural: In addition to capitalizing on faster, broader innovation, the idea of the “sharing economy” taps into a growing disillusionment with consumerism, for both environmental and economic reasons.

“As a person, I was an entrepreneur and an environmentalist, and those two didn’t come together until the Mesh,” Gansky explains. “One of the things for me, with the Mesh, was bringing these things together so that what’s good for the planet and what’s good for communities and what’s good for a business are more aligned.”

Enter the Mesh.

In her book The Mesh (excerpted below), Gansky describes an economic system based “on access rather than ownership,” where the same product is “sold” (in essence, shared) over and over. The concept builds on Gansky’s own key goals: reducing waste (the environmentalist) and improving consumer access and service (the entrepreneur).

Gansky began theorizing about the Mesh in 2007 and 2008. The recession followed, prompting a new frugality, and a general distrust in Wall Street (witness the Occupy movement). That, together with rising environmental consciousness, accelerated the Mesh model.

“People are more concerned about waste and value [now],” Gansky says. They’re also disillusioned enough with big, longstanding brands that they’re willing to experiment. “That’s created a little crack in the armor for those of us that are entrepreneurs,” Gansky says, “to not have to work so hard to have people try something they’ve never heard of.”

To some extent, the Mesh is concentrated in major cities, where Zipcar’s car-sharing service and TaskRabbit’s errand-swapping (pay someone to pick up your dry-cleaning on Monday, or pick up theirs for them on Friday) are more convenient and accessible. But web-sharing platforms such as Netflix, Pandora and Spotify have enabled even distant locales to participate in the Mesh, and hyperlocal sharing systems such as Saturday clothing swaps and food co-ops have long exemplified the concept of a sharing economy.

“The Mesh meets you where you are—physically, geographically and also in your life,” Gansky explains. “You might be in a place where sharing day-to-day transportation just doesn’t make sense, but sharing Sunday evening food experiences makes a ton of sense. People do what makes sense to them.”

Gansky envisions an arsenal of Mesh options—almost a personalized economic system—available to every person or community.

“Each of us—as individuals, as companies and as cities—will have a portfolio of services we use to access people, talents, goods and services,” Gansky explains. “And some of those will be buying something—I’m still going to buy my new computer or my new mobile phone, probably still own my bicycle—but there’s a bunch of things I’m willing to Mesh.” (Yes, it’s also a verb.) “Like, my own kayak that I use twice a month? Totally willing to share that.”

In typically Meshy form, Gansky’s idea exists in far more interactive ways than just a book. Her website (meshing.it) offers an extensive directory of more than 6,000 Mesh-friendly businesses around the country, including the Santa Fe Public Library (the original Mesh?) and the Santa Fe Business Incubator, as well as startups like Flinc, a German ride-sharing service that matches drivers with riders in real-time, using smartphone data (see page 21). Gansky has also helped develop Mesh Labs—the “city starter” to fundraising’s Kickstarter—which helps cities expand and capitalize on their own sharing economies.

“One of the really interesting components is creating more transparency,” Gansky says. “That’s what Mesh Labs is about, and that’s what the Mesh community directory is about: allowing people to say, ‘Wow, this is cool; in three other cities, they have this tools library, and it works like this,’ or ‘They’ve done really simple bike sharing.’”

“What’s really interesting about Santa Fe to me is [that] it has a disproportionate amount of creatives for the population of people, so theoretically—irrespective of everyone’s tax bracket—just the idea that you have so many bright, creative people,” Gansky says. She suggests leveraging that population into design-a-thons, recurring pop-up events and maybe even an all-encompassing, citywide website devoted to sharing platforms.

To some extent, this platform exists already in MIX Santa Fe, the monthly networking event currently running a competition for the best business plan in Santa Fe (see sidebar, page 23). But what of Santa Fe’s tendency to talk a big game without actually taking action?

Gansky has one crucial piece of advice: “In order to do it, you have to start.”

—Alexa Schirtzinger

The Mesh: Why the Future of Business is Sharing By Lisa Gansky

Some things are better shared. There is much to be said for owning things. But the dominant ownership mindset has often blinkered our business brains. The fact is that our commerce, not to mention our social lives, has always depended on sharing. When you start looking for them, “share platforms” are everywhere. During that holiday season in New York, essential shared goods and businesses seemed to jump out at me—hotels and apartment buildings, subways and taxis, airports and planes, churches and libraries. All the things that seemed to make New York…New York. Some are public, some private. The entire infrastructure—from the telephone lines and wireless networks, to streets and sidewalks, to public art and parks, to the legendary NYFD—is shared.

Some of history’s cleverest business minds understood the power of share platforms, from the aggressive titans who made fortunes building the nation’s railroads to Conrad Hilton, who created the first premier brand of international hotels. Now, a new era of sharing-based businesses is beginning. Businesses as big as Netflix or Zipcar, and as small as a guy who rents Christmas trees, have figured out there is gold in giving people convenient access to shared goods.

These new share platforms differ in important ways from the type that profited Conrad Hilton. In Hilton’s first few decades of operation, the communication infrastructure connecting the hotels to each other and to their customers—principally telephones and telegraphs—did not change much. Under that system, you called or wired to make a reservation for a nonnegotiable price. A clerk transcribed the information into the hotel’s paper-based reservation system.

The new share-based businesses are bolstered and built on social media. Using Web-enabled mobile networks, they can define and deliver highly targeted, very personal goods and services at the right time and location. Today, using a pocket-size mobile phone, you can sit in a café while you map nearby hotel rooms, read reviews, play a video of the lobby and guest rooms, compare prices, negotiate a deal, request a recommended room, make a reservation, pay for the room, and generate directions to the hotel from where you’re sipping your latté. In some places, your phone can send your location to a taxi service and find someone nearby who wants to share the cab. In the near future, the hotel’s app may send you a bar code that offers you a room upgrade and a free drink and then opens the door to your suite, bypassing reception.

This shift represents much more than an improved reservation system. Up to now, the information revolution has primarily swept through industries and services that are or can be digital—numbers, text, sound, images, and video. Related sectors, such as banking, publishing, music, photos, and movies, have undergone massive change. Now, mobile networks are rapidly expanding that disruption to physical goods and venues, including hotels, cars, apparel, tools, and equipment.

OK, so maybe our cover design is a tiny bit derivative, but think of it this way: We’re sharing!

Netflix slays a movie dragon.

To illustrate, let’s return to Blockbuster. Wayne Huizenga, as I mentioned, grew highly profitable enterprises by recognizing the advantages of share platforms. Whether he was dealing in Dumpsters or videos, his core strategy was to invest in products that customers could use over and over again. He acted on the advantages companies gain through multiple transactions with customers. Through its chain of stores, Blockbuster collected information on what videos were being rented, and in what areas, which allowed the company to efficiently manage its stock. Through Blockbuster club memberships, the company kept in touch with customers and rewarded them with discounts. Blockbuster outgrew its competitors (many of which copied their basic strategy), and looked set to dominate the movie rental market for years to come. Then it all came tumbling down.

Netflix used what I’d call a textbook Mesh strategy—if a Mesh textbook existed—to beat Blockbuster. First, Netflix paid close attention to Blockbuster’s vulnerabilities with its best customers. Netflix knew that Blockbuster’s Achilles’ heel was late fees. Blockbuster’s revenue model depended on the fees, but customers hated them. Late fees were irritating to pay, like parking tickets, and created anxiety around running the videos back before the noon deadline. Worse, its best customers were the most likely to be punished by the fees. Netflix realized that if it could create a profitable business model that didn’t require late fees, it’d win.

The then-in-progress shift to the DVD format presented an opportunity. Netflix realized DVDs could be safely and inexpensively delivered by the post office. Its customers wouldn’t have to rush down to the rental store, hoping that a new release would still be available. They wouldn’t have to wait in line behind a guy arguing with his girlfriend, only to reach an underpaid clerk who’d clearly rather be somewhere else. And they wouldn’t have to pay a late fee, because there weren’t any late fees. Instead, Netflix introduced a subscription model that allowed customers to watch and return movies at their own pace.

What clinched Netflix’s advantage, though, was that it functioned as an information business. By creating a Web-based share platform where people could buy a subscription and queue up their movie choices, Netflix executives knew they could really get to know the customers. Early on, Netflix began using a customer’s prior selections and ratings to suggest other videos that might be of interest. As the service developed, the company added layers of information to inform a user’s choices, such as reviews from people in the network whose profile of selections and ratings were similar. Recently, it sponsored a contest awarding a million dollars to anyone who could significantly improve the movie recommendation service. Thousands of teams from more than a hundred nations competed. Netflix’s “recommendation engine” relies on algorithms culled from masses of data collected on the Web, including that provided directly by customers. The lesson learned from the contest, according to the New York Times, was the power of collaboration, as winning teams began sharing ideas and information: “The formula for success was to bring together people with complementary skills and combine different methods of problem solving.” The result was an improved engine for sussing out consumer preferences, and a marked increase in their satisfaction and retention. Very Meshy.

Author and entrepreneur Lisa Gansky helped pioneer GNN, the first commercial website, and photo-sharing system Ofoto before introducing the world to the Mesh, her concept of a sharing economy.

Netflix also included ratings and reviews from newspaper critics and customers. Over time, more social networking functions were built in to allow friends to suggest movies to each other. The Web site encouraged customer feedback on improving the service, and continually introduced new tools to make it easier to find, rate, and order movies and TV shows. Rather than conducting expensive national advertising campaigns, Netflix created partnerships with nearly every brand of DVD player. Each new player included a card offering three free DVD rentals from Netflix. The card also made a promise: “No Late Fees.”

Instead, Blockbuster paid a late fee. They were late in acknowledging customer resentments, and late in understanding the spreading power of social networks to shape brand perception. They created a share platform, but neglected other elements that make Mesh businesses so competitive. Netflix’s more robust and networked share platform gave it the power to collect and crunch consumer, usage, and product data to shape customized offers. Its service is delivered locally, but spread through social networks, partnerships, and word of mouth. With its more nuanced knowledge of customer preferences and its culture of innovation and trial, Netflix can rapidly adapt offers to particular communities and markets. These are classic Mesh advantages. And in a business blink of the eye, Netflix replaced Blockbuster as the dominant player in the category. In the future, the byword will be “convergence”—of TV, the Internet, and mobile devices. Netflix remains well positioned to compete in that arena as a sophisticated information company with a trusted brand. SFR

Outtakes from the Mesh directory (hint: we’d like to see these in Santa Fe)

FrentsFrents ups the sharing ante with a platform for sharing information about what you own and then connecting you with others to share actual physical goods. frents.com

UluleLike Kickstarter, Ulule uses crowdfunding to support independent projects such as photo essays, video games and music albums. If a project doesn’t meet its goal, donors receive a full refund.ulule.com/projects

FlincBy tracking users’ locations via their smartphones, Flinc provides a better way to catch a ride. Rushing out the door from work and need a quick lift to the Rail Runner depot? Flinc will help you connect with nearby drivers.flinc.org

TaskRabbitThis service connects busy professionals who don’t have time to grocery-shop (and those of us who simply don’t know how to, say, change our oil), with people willing to do these jobs for a small fee. (It’s not yet in Santa Fe, but we’ve asked!)taskrabbit.com

52 Perfect DaysThere’s way too much travel writing out there; 52 Perfect Days collects the most valuable information—including insider tips on how to travel like a local—and sorts it by location.52perfectdays.com

2 Good 2 TossYou probably threw away a perfectly good [insert household item here] last time you moved; keep it alive by swapping or selling.2good2toss.com

WhipCarYour car sits idle most of the time; why not rent it out and make a little money while you’re not using it? This one’s a game-changer—and it’s so green!whipcar.com

mix & mesh

In many ways, MIX Santa Fe, the monthly networking event designed to foster communication and collaboration against a backdrop of free food and booze, exemplifies the Mesh. Over the course of its existence, MIX has hosted various challenges and competitions, often handing out small grants to projects that seem particularly promising and encouraging locals to share ideas, plans and concepts.

MIX also attracts the same demographics that can be instrumental in catalyzing a full-fledged sharing economy: In April, 70 percent of MIX attendees were in their 20s or 30s, and the vast majority categorized their work as in the “creative” field. MIX Santa Fe’s latest project is BizMIX, a business plan competition with a much larger-scale reward than usual: more than $10,000 in cash, plus mentorship and other resources, for the winning ideas.

Of course, that means that the other 70-plus business plans—whose sheer numbers bode well for Santa Fe’s entrepreneurial potential—will still be without funding assistance. But to Gansky, the opportunity to start small is just one more advantage of the sharing economy.

“The other big piece of the Mesh is basically this idea of define, refine and scale,” Gansky explains. “A lot of times, people who can get money waste money because they go and build this big thing and don’t really have clarity on what’s going to work or who’s going to be interested.” Meshier models, like a small monthly clothing exchange or a pop-up neighborhood vegetable swap, allow entrepreneurs to test their concepts before making them bigger or more permanent.

“You kind of see whether it’s growing in a particular location, [whether] people like the concept, if the price is right,” Gansky says. “There’s really interesting models.”